A diagnosis has been made that the Asian currency crisis is likely if the won falls to 150 yen per dollar, depending on the strong dollar system in the case of a sharp decline in the yuan and yen.
On the 28th, a strategist at Macquarie Capital in Hong Kong announced that the Korean won and the Philippine peso were the “weakest currencies” with a deficit account.
Despite large dollar reserves, “the currencies most vulnerable to risk pockets are those with deficit accounts, such as the Korean won, the Philippine peso and the Thai baht,” he said. It could lead to dollar buying and hedging demand for the stock," Macquarie's Trang Chu Li strategist told Bloomberg.
"Asian markets are at risk of re-emergence of crisis-level stress as two of the region's most important currencies collapse on the relentless onslaught of a strong dollar," Bloomberg said. he said today.
Vishnu Bharatan, Head of Strategy at Mizuho Securities in Singapore, said: “The yuan and the yen are big anchors in Asia, and weakness in these currencies risks destabilizing Asian currencies for Asian trade and investment. “If the losses deepen, the next level will be the level of the Asian financial crisis of 1997,” he told Bloomberg.
According to Bloomberg, global funds withdrew about $44 billion from Taiwanese stocks, $20 billion from Indian stocks and $14 billion from Korean stocks this year, while Indonesia's bond market suffered an outflow of $820 million.
“Currency risk is a bigger threat to Asian countries than interest rates,” said Taimur Beig, chief economist at DBS Group in Singapore. .
The threat of foreign capital outflows is getting more serious as currency depreciation accelerates. The yen crossed 145 yen to the dollar for the first time in more than 20 years last week as the US-Japan monetary policy gap widened further after the Fed's fifth consecutive rate hike. The yen has since reversed some of its losses, but has already become an unavoidable decline.
Regarding the government intervention, Bloomberg said, "Japan intervened to support the yen for the first time since 1998, after the central bank triggered further declines in the currency by sticking to ultra-low interest rates as global peers rose." It rose 2.5% against the dollar and broke the key sentiment level of 145, a sharp retreat from its trough on the same day, and senior currency official Masato Kanda said on the 22nd that the government was taking 'decisive action'," reported the report.
The yuan surpassed the 7 yuan level to the dollar in early September due to pressure from the US Federal Reserve, the coronavirus lockdown and the real estate market crisis. "The People's Bank of China has created a crisis," Bloomberg said. It is now more expensive to bet using derivatives.”
Unlike South Korea, the Philippines had a summit meeting with US President Biden in New York and was able to import crude oil from Russia, approaching low energy prices.
Jim O'Neill, a former chief currency strategist at Goldman Sachs, the largest investment bank in the United States, said about the origin of the Asian financial crisis, "If the yen exceeds 150 yen per dollar, an Asian financial crisis similar to that of 1997 could occur." A breakout will trigger a massive exit of Western capital from Asia,” he told Bloomberg.
The World Bank on Thursday lowered its growth outlook for East Asia and the Pacific this year amid slowing global demand, rising debt and inflation headwinds, forecasting a slowdown to 3.2%, less than half of last year's 7.2%.
Bloomberg said it was well below the lender's forecast of 5% in April.
The World Bank cut China's economic growth rate to 2.8% from 5.0%. China's growth rate last year was 8.1%, a drop of one-third